The Reserve Bank of Australia is desperately trying to prop up its currency. From its July 25 high, the Australian dollar has fallen as much 13 percent against the US dollar and 20 percent against the Japanese Yen. The currency?s losses over the past week are steepest in 24 years and far surpass the biggest weekly loss in October 1998.
Even though the Australian dollar reversed quite a bit today, the initial reaction off of the RBA intervention was minimal. In fact, the Australian dollar went on to hit a new 9 month low in early European trading. With only $64.87 billion in foreign exchange reserves, the central bank has little to work with. However, their intervention indicates that they have shut the door on further interest rate hikes. The New Zealand dollar moved in lockstep with the Australian dollar while the Canadian dollar reversed significantly after the Fed?s discount rate cut. There is a lot of data on the Canadian calendar next week, so expect the currency to be in play. There is no Australian data but New Zealand will be releasing their trade balance.